Shah, J. - (1.) This appeal is filed with certificate under Section 66-A (2) of the Income Tax Act, 1922.
(2.) The assessee is a private limited company carrying on business in "Mica Mining". Under Article 42 of its Article of Association, remuneration payable to the Managing Director and the Deputy Managing Director of the assessee was fixed at 30% of the annual net profits subject to the minimum of Rs. 5,000/-. In the year of account ending June 30, 1958, the assessee debited an amount of Rupees 66,106/- paid to the Managing Director and the Deputy Managing Director. For the assessment year 1959-60 the Income-tax Officer while computing the taxable income in exercise of his power under Section 10 (4-A) of the Income-tax Act allowed only Rs. 54,670/- as remuneration for the Managing Director and the Deputy Managing Director, and disallowed the balance of Rs. 11,436/-. He was of the view that the allowance paid to the two Directors was excessive or unreasonable having regard to the legitimate business needs of the Company and the benefit derived by or accruing to it therefrom. The Appellate Assistant Commissioner confirmed the order. In second appeal, the Tribunal held that the Income-tax Officer had jurisdiction under Section 10 (4-A) to determine the reasonableness of the claim for remuneration paid to the two Directors and on the materials on the record he was justified in disallowing the amount of Rs. 11,436/-.
(3.) The Tribunal referred the following question to the High Court of Patna for opinion: "Whether in the facts and circumstances of the case, the Tribunal was correct in applying the provisions of Section 10 (4-A) of the Income-tax Act to the case of the assessee and in disallowing Rupees 11,436/- out of the remuneration paid to the Managing Director and Deputy Managing Director in accordance with the provisions of the Articles of Association of the Company - The High Court held that the Income-tax Officer had jurisdiction under Section 10 (4-A) to disallow a part of the remuneration, and that the disallowance of a part of the claim cannot be said "to be unjustifiable or illegally disallowed by the authorities".;